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Archive for May 2012

Understanding Your Credit Report

A credit report is a history of how consistently you pay your financial obligations. It is created when you first borrow money or apply for credit and is built over time.

The companies that lend or collect money or issue credit cards (banks, finance companies, credit unions, retailers, etc.) send credit reporting agencies specific and factual information about their financial relationship with you. Details, such as when you opened up your account, timeliness of your payments and  if you have gone over your credit limit are shown in full.

Although this information is confidential, you have the right to see your credit report and no one else can have access to the information in the report unless you allow it.

Typically, when you apply for a loan, a credit card or even a mortgage you will need to allow this organization to check your credit history.

The credit report summarizes information about the different types of accounts you have. It will include the following account types:

  • Revolving accounts, like credit cards and lines of credit
  • Installment accounts, like loans
  • Other accounts, eg: cell phone
  • Collection accounts

There are many ways to order your credit report, such as by phone or fax. The easiest and safest method is by internet through a credit-reporting agency such as Equifax or TransUnion Canada.

When you receive your credit score it’s important to make sure that the information in the report is correct. If the score is lower than you want, read the report carefully to find out which factors are most likely having a negative influence on the score, and then work to improve them.

  • Make sure you have a credit history: you may not have a score because you do not have a record of owing money and paying it back. One way to build a credit history is by using a credit card.
  • Always pay your bills on time
  • Don’t go over 50% of the credit limit on your credit card
  • Apply for credit in moderation

Learn Before You Leap – Borrowing and Budgets

How Much Can You Borrow?

Before you start looking at homes, visit your lender for a pre-approved mortgage. The lender will look at your finances and determine the amount of mortgage they are willing to give you. The maximum amount you can qualify for depends on a number of factors but the most important are your household income, your down payment and the mortgage interest rate.

Remember Your Budget

Quite often you will qualify for more than you expected. This is where preparing your budget beforehand is so important. Remember, your goal is to not over-extend yourself financially. Let your budget be your guide in determining how much mortgage to take on. You now know how much you have to spend, but not all of it can go towards the purchase price of your new home. Some of it will have to be used to cover costs associated with buying a home.

Learn Before You Leap – Moving Costs to Keep in Mind

Upfront Costs

• Deposit: up to 5% of the purchase price, made when you make an offer to purchase.

• Down Payment: 20% of the purchase price is required for a conventional mortgage.

• Home Inspection Fee: generally $500.

• Prepaid Property Taxes and or Utility Bills: to reimburse the vendor for prepaid costs such as property taxes, filling the oil tank etc.

• Property Insurance: covers the cost of replacing your home and its contents.

Property insurance must be in place on closing day.

• Survey or Certificate of Location Cost: $1,000 to $2,000 range.

• Legal Fees and Disbursements. Must be paid upon closing. Minimum of $500.

• Land Registration Fees: a percentage of the property’s purchase price. Check with your lawyer/notary to find out the current rates.

• Property Appraisal Fee: between $250 and $350.

• Moving Expenses.

• Additional items

 

Other Costs

• Appliances

• Service connection fees: Charges for utilities, telephone, gas, electricity, cable TV, satellite TV, Internet etc.

• Renovations or Repairs

• Window treatments

• Decorating materials

• Snow-clearing equipment

• Gardening equipment

• Dehumidifier

 

Condo Costs

If purchasing a condominium, there will be some fees in addition to the ones mentioned above. They are:

• Estoppels Certificate Fee: up to $100

• Initial payment of the monthly condominium fees